Top CEOs agree: US is down the crapper

CES 2011 The leaders of Cisco, GE, and Xerox are worried that the US is losing its competitive edge, and that it's high time to stop grandstanding and do something about it.

"I'm optimistic, but I think that's partly because that's in my DNA, but I think we're at an inflection point, unfortunately," warned Cisco chairman and CEO John Chambers, who shared a panel with the similarly titled Ursula Burns of Xerox and Jeffrey Immelt of GE at the Consumer Electronics Show in Las Vegas.

That inflection point, in Chambers' view, refers to whether the US will go forward or slip back, because the country is not only being challenged by other economies, but also because in its education and immigration policies, it's shooting itself in the foot.

"I would not give us such a good grade as I'd like to see in terms of being an innovator five to ten years out," said Chambers. "We're still leading, but our leadership is shrinking."

Immelt agreed. "As a country, the rest of the world is moving faster than we are," he said. "The world's not standing still; China's not standing still."

The GE CEO and chairman also noted that although the Asian economic upsurge has gotten a lot of press, the US is falling behind other countries, as well. "We all like to talk about China and India, but Germany has come out of the recession stronger than it went in because they've focused on competitiveness, job creation, productivity, and innovation. So the US is going to have to play in a very competitive way."

Burns noted that the US isn't preparing for its own future. "I'm nervous because we're not investing in some of the downstream efforts that we have to invest in, like education."

Not that things are desperate – yet – she said. "We still do have these functional pillars: an education system ... an industrial infrastructure, a government infrastructure. But we don't actually coordinate them with a long-term view as well as some nations do. We have to change that to continue to be competitive."

Simply put, Burns said, "In educating the mass population to be productive in the future, we are failing."

Chambers agreed. "I think our K-through-12 system is broken. The [international] scores have recently come out, and not only are we not in the top 10, we're not in the top 20. We're 25th," he said, adding: "I think education is the most important long-term change we need to do in this country."

It's not that the business community is standing on the sidelines, not trying to help to fix the US educational system, said Immelt. "If you took the Fortune 50 companies, I'd bet we collectively invest billions out of our foundations and things like that in [secondary] education."

One problem is coordination and commitment. "This is a place where government and business should work together, can work together," Immelt said. "There ought to be a call to arms on education in this country. It's a complete no-brainer for business and government to be aligned, because our interests are completely aligned."

Chambers said that a national, focused effort is necessary, not merely more incremental steps. "Whenever you face a crisis, you have a chance to make very gradual improvement – which doesn't get you very far, you could move from 25th to 21st – or you have a chance to go back and say, 'Let's fix this once and for all'."

Burns said that although businesses are trying to help education, much of the money is being wasted. "I don't spend a lot of money without measuring outputs," she said. "We spend hundreds and hundreds of millions of dollars, and if you look at it honestly, at the output of this money that we're spending for the education system, we would say it's failing, because the outputs really haven't changed that dramatically.

She also said that a coordinated, measured effort is key. "We have to coordinate better, we have to work better with the ... educational systems, and with each other, and actually keep programs that work and kill the ones that don't work."

Chambers was of the opinion that the educational system could learn a thing or two from the folks at CES. "This show is all about rapid innovation. If you're two years behind in this industry, you're history," he said. "We have not changed the way we teach our children. We haven't changed the way collaboration is occuring.

Immelt said that the number of engineers that a country produces is a measure of how competitive that country will be in the future. "There's a million and a half engineers graduated in China every year. There's still more sports therapists graduated in the US than electrical engineers. So that's a losing equation. We're going to have to switch this. I mean, a good massage is still good, but it shouldn't stay that way."

"We're sliding," Chambers said. "Our global competition is increasing." He then added another problem area in which he think the US is screwing up. "If you only have around 300 million people, and haven't got a good immigration policy to bring in the best and the brightest from the rest of the world, and you don't educate your young people well, then planning ahead – for 20 years – gets tougher."

Immigration follies

The US immigration policy is counter-productive, Chambers believes. "Today we are hanging up a sign that says 'You're not welcome to come into this country'," he said. "We've gotta change that. And for those students who come to this country, we gotta say: 'When you're through, here's an automatic green card stapled to your diploma'."

Immelt agreed. "We do have great universities, but most of the graduate students in science and math and the hard sciences are coming from abroad, and we are kicking them out as soon as they graduate."

Burns agreed that educating engineering students from around the world and then not allowing them to remain in the US is "an absolutely horrible thing. It doesn't make any sense whatsoever. The way we're approaching this problems is: 'There are enemies out there! And if all we can do is keep the enemies away we'll be successful'," she said of the American attitude. Such an approach is wrong-headed, Burns believes: "It's not a fight about 'them', it's a struggle about 'us'."

From Immelt's point of view, however, educating the world's engineers gives the US an advantage when it comes to building relationships. To illustrate his point, he told of his own experience at GE: "We make about 120 heavy-duty gas turbines. Almost all of them are exported from the United States. High-tech power generation. Our biggest customer over the past four or five years has been Saudi Electric Company. I go to Riyadh, meet with the management team, sit around and have lunch, at least once a year. Forty guys around lunch, sitting around talking about what we can do better, things like that. All of them are in their forties and fifties, all of them educated in the United States."

The fact that those Saudis – and engineers in other companies – were educated in the US gives him an advantage, Immelt said. "It allows me to meet with Seimens, it creates jobs in the US [because of] the relationships."

But that advantage is shrinking now that US immigration policies have become more strict – not only kicking out those engineers who studied here, but also cutting down the number who are allow into the US in the first place. "Now all of the young people from Saudi Electric are going to Canada, Australia ... to go to school, Immelt said. "So the next generation of relationships that we've enjoyed are missing. [Having those relationships] creates jobs, it creates trust."

Chambers reiterated the need for coordination. "We've got to do a better job of government and business working together to say 'Here's what's good for America'. Because each one of those engineers that I get from China or India who's educated here or who comes here to start their company, there are two more American jobs that we create within our company, and there are five more in Silicon Valley ... that get generated."

It wasn't always this way, Chambers said. "Our immigration policy used to encourage the best and the brightest to come here, stay here, start companies here. We've now reversed that. If you only have 300 million people, you aren't going to be able to have your standard of living increase unless everything changes in terms of: 'Welcome. Please stay here. Please start your companies here."

The whole US immigration system is a mess, Immelt believes, and there's one overarching reason why: "I think we've allowed this to become so politicized," he said.

When asked if the business community can separate the issue of shutting the door to the "best and the brightest" from the more gut-level, America-first, emotional anti-immigration argument, Immelt said: "I think we have to," and Chambers added: "I think the business community already has."

"This isn't real complex rocket science to change it," Chambers said. "We can't make decisions one year at a time – we gotta say 'This is the national policy: attract the best and the brightest.' Security checks are fine, but keep them here and hang out the welcome mat, and make them American citizens, not just a green card.

Immelt, however, thinks that the climate isn't ripe for Chambers' rational immigration policy. "Unfortunately, it's harder than that. If we had the luxury of having immigration explained to every American by John Chambers or Ursula Burns we could solve this, but that's not who they're hearing – they're hearing bad stories, sound bites, and things like that.

"So I think there's a broader, macro picture – and I'm not sure any one of us can do it – but it's all about rebuilding confidence and trust ... in all big institutions. What ends up happening is that things like immigration become sub-points to a broader narrative of 'We don't trust big institutions. They're taking our jobs. Globalization isn't working.' Business can no longer sit on the sidelines on any of these points. We gotta fight for our future."

Chambers believes that business is partly to blame. "I think we in business have done ourselves a terrible disservice by not doing a better job of keeping the American people's trust and working effectively with government to achieve these goals. We've almost worked at loggerheads on it. I think we need to get back to the basics. We're all good American companies. We want to grow here in America and it's not what we're working together to do it."

Good American companies, perhaps, but still businesses that look towards the bottom line. When asked if given the choice she would build a facility in America and hire Americans rather than opening facilities overseas, Burns answered: "Because a large amount of my revenues are outside the United States, I have to build close to a reasonable market. It depends upon the market segment, it depends upon the technology I'm using, but I don't wake up in the morning and say my preference is to actually employ Americans.

"My preference is to employ great people anywhere in the world ... I think that that question – which I get asked a lot – is one that does start the debate from the wrong perspective. It starts the debate from 'You have a choice between an American and a German, and you choose the German'." That's a false choice, from Burns' persepective – it's the market that makes the choice for you.

And the US market, the three agreed, has a cloudy future because of a broken educational system and a counterproductive immigration policy.

"We're falling behind on IPOs," Chambers said. "We're falling behind on graduates. We're falling behind on start-ups. We're falling behind on job creation." It's not time to throw in the towel, he said, but it is time to stop complaining and start acting. "Let's start making every decision [based] on how we get that back in line," he said.

But time is running out. "If you're one year behind," Chambers said, "you're toast." ®

Bootnote

Immelt gave the crowd a bit of insight as to why CEOs are concerned for America's future. "What makes us paranoid is that we see a lot, we travel a lot. I spend 60 per cent of my time out of the office, most of the time outside the country. I've been going to China and India since 1984. So I have the burden of knowing what's happening. I get back, you know, and I sleep like a baby: wake up once an hour crying. That's what it's like to be a CEO."